Biden's Municipal Broadband Push Clashes With State Restrictions

President Biden's transformative push to expand internet service by treating broadband more like a public utility is on a collision course with laws in 17 states.

And, the potential conflict is raising questions about whether his administration is willing to use federal infrastructure dollars to twist the arms of mostly Republican-run states to change laws they have on the books restricting municipal broadband projects.

The states argue that these types of laws are needed to protect taxpayers and prevent government overreach.

The Biden administration's view is that one way to lower broadband prices around the country and to expand service into areas where it's lacking is to get more municipalities and public utilities to begin offering high-speed internet—similar to electricity or water.

In laying out Biden’s infrastructure proposals last March, the administration said that local governments are under “less pressure to turn profits” than companies and would offer internet access at lower prices. And, if faced with new competition from local governments, the thinking goes that private service providers, like AT&T and Comcast, would be pushed to lower their rates.

To further that vision, the Infrastructure Investment and Jobs Act spells out that states cannot exclude municipalities from getting some of $48.2 billion in the law to expand broadband service.

The problem is that a number of states bar or put up obstacles to municipalities starting their own broadband networks.

For instance, Missouri bans municipalities from offering broadband. And Montana has a law that allows a city or town to provide internet services only if no private provider is available locally. Another state, Nevada permits only municipalities with less than 25,000 people, and counties with less than 55,000 people, to offer service.

In spite of restrictions like this, the infrastructure law says that if a state wants a share of the broadband dollars, it “may not exclude” local governments or public utilities from getting the money to expand internet service. This sets up a clash between how the federal law is intended to work and the state-level policies.

Several consumer groups see this as an opportunity to sidestep state laws.

They are urging the National Telecommunications and Information Administration, the branch of the Commerce Department administering the broadband dollars, to require states to waive their laws and open the money to localities interested in broadband projects. Such a move would likely anger officials in some states.

A NTIA spokesman declined to comment. But the agency is scheduled to issue guidance on how states can use the broadband dollars in May.

Groups like the National Association of Telecommunications Officers and Advisors say that Congress clearly intended for broadband money in the infrastructure package to be open to localities. NATOA notes that the law stipulates that states “may not exclude" cooperatives, nonprofit organizations, public-private partnerships, utilities, or local governments from grants.  

“Congress’s clear intent to ensure local governments are eligible subgrantees is meaningless if a state limits or prohibits local governments from using the funds for deployment,” the association, which represents the telecommunications interests of local governments, wrote to the National Telecommunications and Information Administration.

NTIA, the group said, should require states with barriers to municipal broadband to waive those restrictions when receiving the federal infrastructure dollars for high-speed internet.

If they refuse, “NTIA should set clear consequences,” NATOA said. The agency, for example, could withhold all or a portion of the state’s allocation and hand it directly to local governments, the group added.

For now though, it’s unknown what NTIA will do.

Approach Backed by Biden

Biden clearly wanted to open the door to municipalities offering broadband in his original infrastructure proposal, the American Jobs Plan, in March 2021.

The proposal—which would eventually be split up and whittled down in negotiations with Congress into the final infrastructure law and the now-stalled Build Back Better plan—would have gone further than just allowing municipalities to get the broadband dollars. Local governments instead would have had an advantage in getting the money over private companies, according to a White House fact sheet.

Finding a way to lower prices would ultimately save tax dollars, the administration argued, adding that subsidies “to cover the cost of overpriced internet service” were not the right long-term solution. 

The fact sheet also said that Biden wanted to lift “barriers that prevent municipally-owned or affiliated providers and rural electric co-ops from competing on an even playing field with private providers.” 

But the idea of municipalities building broadband networks and running internet service is often opposed by critics concerned about public spending and limiting the role of government.

Groups like the National Taxpayers Union warn that such projects could land municipalities deep in debt and say that the business of building and operating broadband is best left to the private sector.

“Quality coffee at an affordable cost would be good for the public as well, and yet no sane person is suggesting that we subsidize coffee consumption with taxpayer dollars, much less create from scratch a taxpayer-subsidized retail coffee shop,” the group has argued.

A Republican aide on the House Energy and Commerce Committee, which has jurisdiction over broadband policy, echoed that view.

“More Federal mandates—especially mandates that are clearly an attempt to pre-empt bans on municipal broadband—and doubling down on failed policies won't close the digital divide,” the aide said.

Committee Republicans last year proposed to create $20 billion in grants over five years to expand service to unserved areas. Public-private partnerships would have been eligible for the funds. But local governments would have had to streamline their permitting processes, including eliminating environmental reviews, to tap the dollars.

Spokespeople for several governors in states with anti-municipal broadband laws did not return requests for comment about the possibility of the Biden administration leveraging the infrastructure dollars to get them to change their regulations.

But even state Rep. Kelly Kortum, a Democratic Montana legislator who unsuccessfully backed a bill last year to make it easier for cities to operate broadband service, predicted that a federal push to make states change their laws would provoke opposition. 

“I believe that local governments should have the option of improving their vital infrastructure to improve the economic stability of their region,” he said in an email.

But he added: “I expect this policy will be viewed as punitive by some of my colleagues [in the legislature]. There is likely a way to improve internet access in a constructive form at the federal level that doesn't rely on withholding funding, or leaving it up to state legislatures.”

Seth Cooper, director of policy studies and senior fellow at The Free State Foundation, a conservative technology policy think tank, said NTIA should make sure that states know that the requirement allowing municipalities to access the broadband dollars exists. But he also said that forcing them to change their laws would violate their sovereignty and “would be going way overboard.”

At the same time, such a move would in some ways run counter to promises by administration officials to give states discretion over how to spend the infrastructure dollars.

Testifying before a Senate subcommittee in February, Commerce Secretary Gina Raimondo, the former governor of Rhode Island, pledged that her department would give states flexibility with the broadband dollars. 

The debate is not the only uncertainty over the infrastructure package that NTIA may have to address in its upcoming guidance. The law also called on broadband providers to offer a “low-cost” option for any new service they build with the infrastructure funds. That has set off a dispute between consumer groups and the broadband industry over what that pricing should look like.

Not the First Clash Over Municipal Broadband

Biden’s support of municipal broadband is the latest attempt by Democratic administrations in recent years to get around the restrictive laws passed mostly by Republican states.

In 2015, the Federal Communications Commission under the Obama administration took a more direct approach. It invalidated anti-municipal broadband laws around the country, saying that communities should be able to offer broadband service if they are dissatisfied with the services private companies provided.  

“The issue is simple: these communities want to determine their own path,” then-FCC chairman Tom Wheeler said at the time.

“The laws at issue today raise barriers to the deployment of and investment in new broadband networks and infrastructure,” he added. “When local leaders have their hands tied, local businesses and residents endure the consequences.” 

The move by the Obama administration was challenged by North Carolina and Tennessee, as well as the National Association of Regulatory Utility Commissioners. The Sixth Circuit Court of Appeals in Ohio decided that the FCC had trampled on the sovereignty of states and in 2016 blocked the order.

Disagreements over the new provision in the infrastructure law could someday end up in court too.

However, some see the Biden administration’s move as different from the FCC’s order. It may not be permissible for the federal government to tell states what to do, said James Bradford Ramsay, general counsel with the regulatory utility commissioners’ group. But, he said, “any government is free to condition access to grants/funding.” Ramsey emphasized that the group hasn’t taken a position on the debate. 

Jim Baller, co-founder and president of the Coalition for Local Internet Choice, which advocates for local governments to provide broadband, said that with the infrastructure law, Congress made clear that municipalities shouldn't be excluded from the broadband funds.

This was underscored when Congress did not pass an amendment that U.S. Sen. Marsha Blackburn, a Republican from Tennessee, tried to attach to the infrastructure act. Blackburn’s amendment would have clarified that municipalities could not be excluded from receiving the broadband funding—unless a state law prohibited them from operating broadband service.

A spokesman for Blackburn did not return a request for comment about how she believes NTIA should resolve the conflict. 

Cooper, of The Free State Foundation, noted Supreme Court cases requiring that conditions Congress places on funding to be unambiguous. Whether Congress meant to push states to change their laws with the infrastructure package is “at best, ambiguous,” he said.

“Nowhere did Congress provide a clear statement that any or all of those state laws regarding muni broadband networks need to be changed or waived in order for states to be eligible,” Cooper said.

In states without restrictions on municipal broadband, some places are moving ahead with projects using American Rescue Plan Act dollars, said Ry Marcattilio-McCracken, a senior researcher with the Institute for Local Self-Reliance's Community Broadband Networks Initiative.

For example, Fairfield City, California is working on a plan to build a city-owned network using ARPA funds. And Waterloo, Iowa’s city council is considering creating a broadband network and using the federal pandemic aid to help pay for a fiber to homes and businesses.

Advocates say that infrastructure act funding could provide a further boost to the ARPA spending already in the works.